Industry Structure

Question 1

Industries

Answer 1

An industry is a group of companies producing products/services that are essentially the same, or perform the same function

Diff sectors- public,commercial, charity, private

Question 2

What is the relevant industry

Answer 2

Clarifying the correct industry can help organisations to identify threats and opportunities more clearly

Levitt (1960) in marketing myopia suggested that organisations do not view the wider industry that they are in, but focus instead on how the products/ services they are producing meet consumers needs

Question 3

Porters five forces

Answer 3

Bargaining power of suppliers
Bargaining power of consumers 
Threat of new entrants 
Threat of substitutes 
Competitive rivalry (amongst existing competitors)

Question 4

Competition

Answer 4

Direct rivals- companies most like yours

Reducing rivalry- differentiate product or service
Segment the market
Achieve a monopoly

Question 5

Managing the five forces

Answer 5

Forces contradict/ balance each other

Managers can consciously try to change their position in the market to change the power balance. They make also try to influence suppliers and customers

Competitive forces are affected by those in the general environment (PESTLE)

Question 6

Key aspects of five forces

Answer 6

1) use at level of strategic business units
2) Define the industry/ market /sector
3) Don’t just list the forces: derive implications for industry/ organisation
4) Note connections between competitive forces and key drivers in macro environment
5) Establish interconnections between the five forces

Question 7

Product and industry lifecycle

Answer 7

Development - growth - maturity - decline

Industry lifecycle driven by R&D, increasing demand, plus new substitutes

Industry is fills an need (e.g.snack foods) whilst a product would be one brand (pot noodle)

Industry and product life cycles are both sensitive to consumer trends/ behaviour

Organisations need to understand all dimensions

Question 8

Small and medium sized enterprises (SMEs)

Answer 8

May be measured by no. Employees and/or gross profit or turnover

Micro business (1-9 employees)

SME employers are small (10-49 employees)

Medium sized (50-249)

Small normally start ups- start as sole traders or small PLCs

Medium normally family businesses (ltd or partnerships) or sole traders experiencing growth

Question 9

Evaluating SMEs

Answer 9

Benefits

Clearly defined market 
High expertise
Non standardised products 
New idea development 
Flexibility 
Easier to control 
Ability to customise to consumers needs

Difficulties 
Limited access to finance 
Reliant on a few people 
High burden of regulation (10 x cost in MNE)
Little growth from exporting 
Difficult to carry out R&D

Question 10

Large and multi national enterprises (NMEs)

Answer 10

Economies of scale and scope

Economic size provides global corporates with power to influence the market

Wal mart,General Motors- USA
Toyota, Mitsubishi- Japan

Have incomes similar to small nations
Benefit from barriers to entry
The unique value of the collective effort

Question 11

Methods of growth

Answer 11

Alliances - two companies work together to their mutual benefit

Mergers- two companies become one, but retain their own specialisation

Acquisitions- one company takes over another company

Organic growth- growth by increasing output and sales internally

Question 12

Diversification

Answer 12

Companies can grow with diversification if they merge with or acquire companies that are unrelated to their current activities (Tesco and Tata steel)

Can lead to conglomerates or organisations with different operations e.g. Tata group
(Steel,power,chemicals,motors,consultancy etc)